Speaking specifically for the laws in the State of California and the typical real estate contract used in the San Francisco Bay Area.
{{(Buyers do not EVER make an offer on any home without properly being pre approved by an ethical and legitimate loan officer) I personally will not show homes to anyone who has not been evaluated and pre approved for a loan. 1-You do not want to view homes out of your price range 2-If you come upon a property you really like you need a pre approval letter or your offer will not be considered 3-Your loan officer will advise as to what not to purchase or to change jobs during your house hunting expedition. If you change jobs after a loan pre approval without lender knowledge and/or purchase items that change your debt to income ratio you will lose your loan and/or adjustments will be made to pre approve you on a much lesser amount.}}
Real Estate contracts can be confusing. There is a lot of disclosures wrapped up in between items that as a consumer you need to check or highlight with the help of a real estate professional to ensure your back door has been covered.
One of the ways is by the use of Contingency periods in the contract. The amount of time can vary between the standard as well as agreed upon time periods by all parties involved. When do contingency periods start> From the DATE when all parties (Seller and Buyer) agree to and sign a purchase offer. Day 1 typically begins the day after the contract has been fully signed and agreed to.
Lets start with the Loan and Appraisal contingency. Standard contract calls for 17 days. Depending on your type of loan and your strength to purchase will depend if upfront you need to extend, shorten and/or ask for an extension of such down the road.
So you have 17 days to allow for the following:(includes business days and weekend days and holidays)
(Example: You sign a ratified purchase offer December 12. You have 17 days to December 29 to remove and/or ask for an extension and/or quit the contract without penalty)
California has active contingency removals. Seller has to give at least 24 hour notice to perform if buyer has not removed contingencies by agreed upon date and buyer needs to ask for extension, if needed prior to the end of the 17 day contingency period.
Your (Buyer) lender once they receive a ratified contract(Purchase offer Signed by all parties) will order an appraisal. There will be a review of your financials. They may want updated pay stubs, bank statements, review your credit report and any other financial particulars. In the meantime your loan officer has ordered an appraisal of the property. The property must appraise at current market value and at the least the purchase price offered. Your financials and appraisal will be sent to the lenders underwriter who reviews all of the financials to ensure you are qualified for a loan.
If the property appraises below the purchase price offer your lender will deny the loan. OR you can go back to the seller to reduce the price to appraised value, you the buyer can bring in additional funds to make up for the difference if you want the house that badly and/or you can use the contingency period to walk away from the contract and receive your earnest money back.
The loan can be denied if your debt to income ratio's have changed below your lenders standard since you originally applied for loan. Within the 17 day contingency period you can walk away from the purchase contract without penalty.
You also have built into the contract Physical Inspection Contingency, Disclosure Contingency, HOA Reviews and Disclosure (if applicable) as well as the Loan and Appraisal.
Each contingency has assigned specific time guidelines for removal.
For more information about contingency periods in a real estate purchase contract please go to my website for directions as to how to contact me.
Terry Osburn, Broker Associate , Listing and Selling real estate in the SF Bay Area since 1999.
Partner with Catherine Myers, Realtor® and Real Estate Consultant to assist home owners in distress by performing a Short Sale of their home. Our mutual website is http://www.ccshortsales.com
My personal website is http://www.TerryOsburn.com
Serving but not limited to the Greater Walnut Creek area and surrounding communities in Contra Costa County. Also serve in Alameda County, Berkeley, Oakland, Albany. In Solano county Benicia.
Represent Seller or Buyer in Single Family Homes, Condos and Townhomes, Lots and Land, Mobile Homes, Short Sales and REO's.
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